BLM oil auction cools from mid-summer fever

The numbers are clear, but the meaning is murky after a Bureau of Land Management auction of oil and gas leases in Nevada fell short of expectations last month.

The federal agency offered leases on 597 parcels with potential for oil and gas exploration, but only 162 drew bids.

Exploration companies paid nearly $1.9 million in bonus bids to the BLM,with the highest bid totaling $66 per acre.

The leases auctioned last month cover 307,107 acres in Nevada.

That's a lot of activity around leases in a state that's never had much of an oil industry, but officials had expected more spirited bidding.

A mid-summer auction drew close to $3.1 million in bonus bids on 163 parcels, and the highest bid was $95 an acre.

BLM officials expected the December sale would exceed even those levels.

And they don't know why it didn't.

"I hope people don't try to read too much into this," says Del Fortner,

BLM's deputy state director for mineral resources.

The mid-summer lease auction was powered in large measure by reports that Wolverine Oil and Gas, a Michigan company, tapped a 1 billion barrel field near Sigurd in central Utah.

Some geologists wonder if Nevada's chopped-up geology might contain similar-sized oil deposits.

Still, the last six months may have seen a cooling in the frenzy that followed the Utah discovery, said Alan Coyner, administrator of the Nevada Commission on Mineral Resources.

After the hot mid-summer event, a BLM lease auction in September drew about $728,000 in bonus bids for 181,058 acres.

Officials didn't have particularly high hopes for that auction, noting that the acreage to be leased didn't get oilmen salivating.

Even though the December auction wasn't as frenzied as officials expected, Coyner noted it still was more active than most in recent history.

But Fortner said some geologists who initially were intrigued by the possibility that Nevada is home to giant oil deposits now wonder if the oil discovered by Wolverine in central Utah might have migrated out of Nevada eons ago leaving the Silver State dry.

Because that question remains unanswered, landmen continue sit shoulder-toshoulder as they pore over records in BLM offices around the state, looking for properties worthy of a bid.

In a BLM auction, oil companies pay a minimum of $2 an acre for a lease, and the bidding goes up from there.

Leaseholders also pay annual rent of $2 an acre.

The federal agency splits the take from its auctions with the state government.

The red-hot lease auction in mid-summer isn't reflected yet in exploration activity around the state.

A mere nine exploration holes were drilled in Nevada this year,many of them in the Railroad Valley area.

It takes time, Coyner said, for exploration companies to raise money from investors to finance exploration programs on the property they've leased.

And even if companies raise the money for exploration, he said, drilling rigs may be difficult to find as rig operators are busy in more productive states such as Texas and New Mexico.